Indiana Senate hears warning of possible budget cuts

The Indiana Senate endorsed a proposal for a new two-year state spending plan on Wednesday, just after its chief budget writer warned that cuts might soon have to be made.

Senators voted 42-8 to advance the budget plan that boosts school funding by 2.3 percent over the next two years while easing some cuts to many urban and rural school districts with shrinking enrollments that were part of the House spending proposal.

House members, meanwhile, voted in favor of a proposed balanced budget amendment to the state constitution, despite arguments that it isn't needed because the constitution already largely bans the state from incurring debt.

The Senate budget plan spends about $31.5 billion over the next two years, with a projected state surplus of nearly $1.9 billion. Those figures are close to what House Republicans approved in February.

The next major step in budget negotiations comes Thursday when a new state tax revenue forecast is presented to the State Budget Committee.

Senate Appropriations Committee Chairman Luke Kenley, R-Noblesville, told senators that the budget plan they were considering was likely the high-water mark for projected revenue since tax collections have fallen short of projections for the current budget year — and the new forecast could lower future expectations.

"It's unlikely that we're going to have as much money as we have today," Kenley said.

The latest state report showed that revenue was about 1.7 percent below expectations for March — the seventh such monthly shortfall in the past nine months. March's figures leave state revenues about $109 million, or 1.1 percent, below projections for the budget year that started in July.

Kenley told reporters that he anticipated state spending would have to be revised downward, but didn't know what areas might face cuts.

"I'd say the big difference is up to today everybody's coming in to me saying 'Would you put this in the budget for me?'" Kenley said. "And tomorrow they're going to be saying, 'Would you please not take this out of the budget for me?'"

Senate and House negotiators have until the Legislature's April 29 adjournment deadline to reach a deal.

The Senate plan phases in over five years school funding changes proposed by the House that shift tens of millions of dollars to growing suburban districts in an attempt to shrink the gap in per-child funding between expanding and shrinking school districts. That funding plan, however, included cuts to more than a third of Indiana's nearly 300 school districts that Democrats called devastating.

Sen. Karen Tallian of Portage, the top Democrat on the Senate Appropriations Committee, said the Senate plan was a positive step but that she hoped for continued improvements as a final budget plan is developed.

"Most of our schools do better than under the House formula," she said. "Now, as someone pointed out to me, that might not be a real high bar."

Also Wednesday, the House voted 83-15 to support Gov. Mike Pence's request for a proposed balanced budget constitutional amendment. The proposal would prohibit the state from spending more than its anticipated tax collections, although lawmakers could suspend that requirement with two-thirds approval in both the House and Senate.

House Minority Leader Scott Pelath, D-Michigan City, called the amendment simply symbolism that plays around with the state's highest document.

House Ways and Means Committee Chairman Tim Brown, R-Crawfordsville, said the amendment would help secure the state's fiscal health.

"It is going to strengthen the framework for how we run state government," Brown said.

If lawmakers endorse the amendment this year, the same language would have to be approved by the General Assembly elected in 2016 in order for it to go before voters in a statewide referendum in 2018. The Senate approved a similar version of the amendment by a wide margin in February.